The economist Steve Keen was in the paper today saying he was going to sell his house in Surry Hills because he believes we are heading for a 40% crash in property prices. Is anyone thinking of taking their equity and running like he is?

God is it awful of me to be hoping that may be the case?

me too lex

Well I am not an economist, far from it, but isn't it true that whatever goes up must come down??? House prices have been crazy in Australia.
Ie. when I bought my first unit in Randwick in Sydney in 2000 it was $275k, three months later another unit in the same block on the ground floor sold for $300k, then six months later the one across the hall sold for $340K. These units were all the same in layout the only difference was cosmetic. $75K in six months that is crazy. However, that being said the units have all settled down to being worth around $370k now but that is still a big jump
Edited to add: I was wrong here is a link to an apartment that is for sale in the same block and they want over $400k
http://www.ljhooker.com.au/images/dynamic/...tial&e3=1921385

Price = Supply and Demand.

If the market is flooded with houses for sale, they will fall.

If one 'respected' economist starts a panic about house prices falling, then of course they will fall as well!

Think about the stock market crash of 1929.

Prices are overinflated in Sydney anyway.

QUOTE

God is it awful of me to be hoping that may be the case?

No, I am too

I could never see property dropping that much. 10, 20% MAX. But really, that big a drop would be devastating to our economy. Besides, no one would sell their property at those kind of losses voluntarily. It would mean interest rates went through the roof making their existing mortgages unaffordable. Selling at a loss in that situation to end up in financial ruin - I would not wish upon anyone.

Keep in mind interest rates (fingers crossed) have begun a downward cycle, which usually means property could actually go up

I think now is actually a good time to buy. Nothing is selling anyway because people just cant afford what is out there, making any serious sellers fairly negotiable. If interest rates do go down it will become a sellers market again - that is what increases prices.

That is all probably wishful thinking though!

Even if prices did temporarily drop by 40%, the only houses that would be for sale would be the odd ones that have been owned since well before the property boom early this decade - of which the owners just decide they no longer want. There would not be enough for the demand, which would in turn, send prices up again.

House prices are also always going to be relative to the price of building new. Again, building materials and wages of builders cant just drop without again creating devastating effects on the economy.

We are selling. Prices are still good in our area. We will buy in an area where prices have already started dropping. The next house we buy will be to live in for 10 years +, so not too worried about short term loss/gain.

If you are planning to move up in the property market, then it can make sense.

EG moving from average suburb 3 bed 1 bathroom house say $600K to same suburb, 4 bed, study, 3 living areas, 2 bathrooms & a pool say $800k.

If the prices in that suburb drop by 15% then you will be better to sell and buy in the downturn.

Does that make sense? I know what I mean

We were looking at moving up - bigger house, nicer suburb in the next 2 years or so. If prices do begin to move downwards, then we may consider moving sooner to maximise our investment and minimise our expense.

I think 40% is a bit over the top although they are saying prices will probably go a bit lower, maybe up to 10%. We've already taken a big hit here, prices have dropped by at least $100,000 (one street saw prices fall $300,000) and most of the mortgagee sales seem to have slowed right down here now. We are about to get back into the market, we've been looking for a good block for a long time now and have found what we want but will be offering the developer around $20,000 less than the asking price as they have been on the market for around 3 months now. As this is a long term purchase for us prices fluctuating won't really matter over 20 years.

I have friends who are selling right now and taking a lot less ($100,000) than what they would have got 2 years ago however the house they are going to buy has dropped by $400,000 and there is no way they could have purchased it at the height of the boom.

Chocolatemum, your scenario is great, but you still run a risk. You would need to sell now and rent while the market drops. But what if it doesn't drop and you end up having to buy in an even more inflated market. I guess it just depends how much risk you are willing to take. Until we have crystal balls that work, its all a bit scary for me.

I suppose that is the thing, the greater the potential risk, the greater the potential gain and pain.

There is no way prices are going to drop 40%.

I wish they would but they won't.

Even if they dropped 10% I would be stoked.

If I had more than one property I would consider selling one now. You have live somewhere and NO way would I be wanting to search for a property to rent, so if I had a "spare" property (ie rental or holiday home etc) I would consider selling one of the properties in order to liquidise some equity.

Alternatively I would do this if I had lovely parents who I could happily live with for the next year or two.....

We are about to sell an IP we bought 12 mths ago, even if the market is "bad" and we get bottom of the buyer range it's still a 30% increase on our purchase price. In the Street I live in houses are still selling very quickly and setting new ceilings.

I am in outer Melb.

Personally I think it depends where you live & what drives the demand for housing in your area, IMO Melbourne is still cheap compared to WA & the NT and parts of Qld. (I know nothing of NSW & SA & Tasmania hence why I have not mentioned them, please do not take offence anyone).

Having said that I think house prices will sit still in alot of area's accross Australia for awhile but I would never guess to predict where it will happen.

no I wouldn't sell in a flat to backwards market, what would be the point? We are waiting though to see what happens with land over here as it could well be a great time to landbank. Some great buys out there, market is slow so a bit of time on our side.

Selling is better left for when the market is high so now is the time to buy.